AESO 2018 ISO Tariff Consultation Application Preview June 26, 2017 AESO Office, Calgary Public
Agenda • Session objectives (slide 3) • Application objectives (slides 4) • Transmission Cost Causation Study Results (slides 6-13) • Rates and Riders updated (slides 14-36) • Revised Terms & Conditions (slides 37-45) – Substantive changes to allow for tariff mechanisms to address past cost allocation issues and Commission’s closure letter from Proceeding 20922 • Issue #1 – legislative framework • Issue #2 – advanced system-related classification of radial transmission projects • Issue #3 – load forecasting – Shift of AESO’s position to require a non-refundable advancement charge if a load connection requires a system upgrade Public 2
Agenda (cont’d) • Other matters (slides 46-51) – Other revisions to terms and conditions – Include updated GUOC rates into ISO tariff – Tariff treatment for energy storage – Cost recovery of CIP Alberta reliability standards – Riders A1 - Dow Duplication Avoidance Tariff revision • Tariff target timelines (slide 52) • Discussion and wrap-up (slide 53) Public 3
Session objectives • Provide an overview of upcoming 2018 ISO tariff application • Provide draft calculated rates and investment based on 2017- 2018 Budget Review Proposal, TFO applied-for or approved wires costs, Transmission Cost Causation Study results and results from POD cost function cost curve • Provide tariff timeline targets Public 4
Application objectives • Close off a number of past tariff initiatives – Cost classification proceedings – Point-of-delivery cost function (contract vs installed capacity) – Rider C, deferral account reconciliation process • Capacity market and other issues raised by stakeholders during consultation to be addressed post-application: – Capacity market cost recovery • Export rates – Coincident metered demand recovery of bulk transmission • Review classification (demand and energy) method – Good electricity industry practice/investment policy • Share with stakeholders as soon as possible the scope and timing of the additional work Public 5
Transmission Cost Causation Study Results Raj Sharma Public
Preliminary 2018-2020 capital cost functionalization Year/Function Bulk Regional Point of Delivery 66.9% 18.1% 15.0% 2016 2018 57.5% 23.9% 18.6% 2019 56.5% 23.8% 19.6% 2020 55.1% 24.2% 20.7% Public 7
Preliminary 2018-2020 operating and maintenance cost functionalization Year/Function Bulk Regional Point of Delivery 20.8% 39.2% 40.0% 2014-2016 2018-2020 21.2% 36.5% 42.3% Public 8
Preliminary 2018-2020 non-capital costs to capital costs ratio Year Non-capital Capital 19.5% 80.5% 2014 18.0% 82.0% 2015 2016 16.3% 83.7% 2018-2020 17.1% 82.9% Public 9
Preliminary combined 2018-2020 functionalization Year/Function Bulk Regional Point of Delivery 59.4% 21.5% 19.1% 2016 2018 51.3% 26.1% 22.6% 2019 50.5% 26.0% 23.5% 2020 49.3% 26.3% 24.4% Public 10
Preliminary final combined 2018-2020 functionalization Includes revenue from regulated generation unit charge, and cost from Fort McMurray West 500kV project Year/Function Bulk Regional Point of Delivery 59.2% 21.6% 19.2% 2016 2018 51.2% 26.1% 22.7% 2019 52.4% 25.0% 22.6% 2020 51.2% 25.3% 23.5% Public 11
Bulk system classification Results of update following the same minimum system methodology do not seem reasonable so the AESO is proposing to continue 2016 bulk system classification for 2018 to 2020. 500 kV Conductor 3x1590 ACSR 2x2156 ACSR Cost per kM $2,100,000 $1,900,000 240 kV Conductor 2x795 ACSR 2x1033 ACSR Cost per kM $1,593,624 $1,701,334 Class Demand Energy 2014-2016 93.1% 6.9% 2018-2020 93.7% 6.3% Public 12
Regional system classification Results of update following the same minimum system methodology do not seem reasonable so the AESO is proposing to continue 2016 regional system classification for 2018 to 2020. 138/144 kV Conductor 1x266 ACSR 1x477 ACSR Cost per kM $362,336 $442,662 Class Demand Energy 2014-2016 88.2% 11.8% 2018-2020 87.4% 12.6% Public 13
POD Cost Function Database, Rates and Investment LaRhonda Papworth Public
2017 POD cost function database includes a total of 285 projects Average Total Average Total Type of Contract Contract Number Cost Cost Project Capacity Capacity ($ 000 000) ($ 000 000) (MW) (MW) Greenfield 112 21.9 2,017.7 $14.6 $1,338.9 Upgrade 173 7.7 1,386.2 $3.4 $599.4 Public 15
Final cost function represents all 285 connection project data points Greenfield Upgrade Power (Cost Function) $35 y = 2.5844x 0.5726 $30 Construction Cost, $ 000 000 $25 $20 $15 $10 $5 $0 0 10 20 30 40 50 60 70 80 Maximum DTS Contract Capacity, MW Public 16
Updating project data had the largest impact on the existing cost function $40 $35 Include 0 MW projects Construction Cost, $ 000 000 $30 $25 Updated Projects $20 Existing $15 $10 $5 $0 0 10 20 30 40 50 60 70 80 Maximum DTS Contract Capacity, MW Public 17
Existing and proposed cost functions • Existing cost function Costs = $2,392,400 × MW 0.5721 • Proposed cost function Costs = $2,584,400 × MW 0.5726 Public 18
How are rates impacted? • Revision of the cost function will affect the average rates paid for system access service by all market participants – The cost function provides the cost causation basis for the point of delivery charge in Rate DTS • Point of delivery charge components are affected by the shape of the cost function, not the level Public 19
Changes to the shape of the cost function will impact rates $40 $35 $35 Existing Cost Function, $ 000 000 Proposed Cost Function, $ 000 000 $30 $30 Proposed $25 Existing $25 $20 $20 $15 $15 $10 $10 $5 $5 $0 $0 0 10 20 30 40 50 60 70 80 DTS Contract Capacity, MW Public 20
How is Rate DTS bulk system charge changing? 1100 900 700 500 300 100 -100 Bulk costs ($ million) 2017 1007 2018 882 2017 2018 Rate DTS – Bulk system charge 2017 2018 Coincident demand charge ($/MW/month) 10,670.00 9,219.00 Metered energy charge ($/MWh) 1.25 0.99 Initial rate calculations. May change for application Public 21
How is Rate DTS regional system charge changing? 700 600 500 400 300 200 100 0 regional system costs ($ million) 2017 386 2018 450 2017 2018 Rate DTS – Regional system charge 2017 2018 Billing capacity charge ($/MW/month) 2,356.00 2,694.00 Metered energy charge ($/MWh) 0.87 1.01 Initial rate calculations. May change for application Public 22
How is Rate DTS point of delivery charge changing? 500 400 300 200 100 0 Point of delivery costs ($ million) 2017 337 2018 391 2017 2018 Rate DTS – Point of delivery charge 2017 2018 Substation Fraction ($/month) 8,789.00 10,109.00 First (7.5 x SF) MW ($/MW/month) 3,559.00 4,100.00 Next (9.5 x SF) MW ($/MW/month) 2,229.00 2,569.00 Next (23 x SF) MW ($/MW/month) 1,555.00 1,795.00 All remaining MW ($/MW/month) 1,007.00 1,157.00 Public Initial rate calculations. May change for application 23
How is Rate DTS operating reserve charge changing? 190 180 170 160 150 140 130 120 110 100 operating reserve costs ($ million) 2017 179 2018 168 2017 2018 Rate DTS – Operating Reserve Charge 2017 2018 Operating reserve charge (allocated hourly) 6.99% 6.58% Initial rate calculations. May change for application Public 24
How is Rate DTS voltage control charge changing? 6 5 4 3 2 1 0 Voltage control costs ($ million) 2017 4.0 2018 5.3 2017 2018 Rate DTS – Voltage control charge 2017 2018 Voltage control charge ($/MWh) 0.07 0.09 Initial rate calculations. May change for application Public 25
How is Rate DTS other system support services charge changing? 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Other system support services costs ($ million) 2017 5.4 2018 5.6 2017 2018 Rate DTS – Other system support services charge 2017 2018 Other system support services charge ($/MW/month) 46.00 47.00 Initial rate calculations. May change for application Public 26
How is Rate DOS changing? • No change to Rate DOS language • Rate DOS 7 Minute reflects full payment of usage ($/MWh) components of bulk system and regional system, and operating reserves • Rate DOS 1 Hour reflects additional contribution to fixed cost of bulk system and regional system over Rate DOS 7 Minute • Rate DOS Term reflects additional contribution to fixed cost of bulk system and regional system over Rate DOS 1 Hour Rate DOS 2017 2018 DOS 7 Minutes ($/MWh) 4.99 4.80 DOS 1 Hour ($/MWh) 16.47 15.67 DOS Term ($/MWh) 94.79 103.71 Initial rate calculations. May change for application Public 27
How is Rate XOS changing? • No change to Rate XOS language • Rate XOS 1 Hour reflects full payment of usage ($/MWh) cost of bulk system and regional system, plus components of operating reserve and fixed cost of bulk system and regional system Rate XOS 2017 2018 XOS 1 Hour ($/MWh) 7.63 7.24 Initial rate calculations. May change for application Public 28
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